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Walker v. Geico Indemnity Co.

United States District Court, M.D. Florida, Orlando Division

March 30, 2017




         THIS CAUSE is before the Court on Plaintiff's Renewed Motion to Compel Return of Inadvertently Produced Documents, and Motion for Sanctions (“Motion to Compel, ” Doc. 67), and Plaintiff's Motion to Disqualify [Defendant's] Counsel, and Motion for Sanctions (“Motion to Disqualify, ” Doc. 29). United States Magistrate Judge Karla R. Spaulding issued an Order (Doc. 70), granting the Motion to Compel, to which Defendant has filed an Objection (Doc. 81). Judge Spaulding also issued an Amended Report and Recommendation (“R&R, ” Doc. 106), recommending that the Court grant the Motion to Disqualify but deny the request for monetary sanctions, to which Defendant also filed an Objection (Doc. 109). Plaintiff did not object to either.

         I. Background

         Plaintiff alleges that she was injured when she was struck by an automobile operated by non-party Priscilla Condemarin. (Am. Compl., Doc. 14, ¶ 6). At the time, Condemarin was insured by Defendant. (Id. ¶ 4). The insurance contract at issue had bodily injury liability limits of $10, 000.00 per person and $20, 000.00 per occurrence. (Id. ¶ 5). According to Plaintiff, in December 2007, Defendant advised Plaintiff's attorney at the time, Michael Sutton, that it intended to tender the full $10, 000.00 policy limits. (Id. ¶ 9). Sutton made note of this conversation in his case management software and included his mental impressions regarding whether any such check should be returned. (Hr'g Tr., Doc. 107, at 92:3-11; see also Second Am. Privilege Log, Doc. 67-10, at 3 (Dec. 17, 2007 entry)). Despite Defendant's representation that it would tender the policy limits, it did not do so. (Doc. 14 ¶ 9). Therefore, Plaintiff filed suit against Condemarin (the “underlying litigation”) and obtained a judgment in the amount of $3, 022, 991.65. (Id. ¶¶ 10, 14; Am. Final J., Doc. 14-3, at 1). In August 2008, during the pendency of the underlying litigation, Defendant finally tendered the $10, 000.00 to Plaintiff, which she rejected, allegedly due to Defendant's failure to timely resolve the claim. (Doc. 14 ¶ 12-13). After obtaining the excess judgment, Plaintiff filed this case, asserting one claim of “bad faith”-i.e., that Defendant breached its duty of care under the insurance contract. (Id. ¶¶ 16-23).

         Around the time that Defendant tendered the policy limits to Plaintiff, Plaintiff's underlying attorney, Sutton, consulted with one of Plaintiff's current attorneys, Fred Cunningham, regarding the viability of Plaintiff's bad faith claim. (Doc. 107 at 36:21-37:12). They had several phone consultations. (Id. at 36:21-23). To enable Cunningham to provide a useful assessment, Sutton sent a letter and attached documents to Cunningham, including a timeline of events created by Sutton. (Id. at 41:12-20; Sutton Aff., Doc. 67-12, ¶ 30). During the calls with Cunningham, Sutton made handwritten notes, documenting Cunningham's mental impressions regarding Defendant's handling of the underlying claim and the viability of a bad faith claim. (Doc. 67-12 ¶¶ 17, 23, 65). Sutton also sent Plaintiff a letter, which discussed the strategy moving forward with the bad faith case, Sutton's assessment of the likelihood of success in the bad faith litigation, and a summary of Sutton's understanding of Cunningham's assessment of the likelihood of success. (Id. ¶ 27). Sutton also made notes containing the substance of his conversations with Cunningham, including Cunningham's assessment of the viability of the bad faith claim and advice regarding strategy, in his case management software. (Id. ¶¶ 40, 42, 43, 47, 55, 56, 59). After Sutton received the check for the policy limits, Sutton sent an e-mail to his legal assistant and his paralegal with directions to return the check, which included notes pertaining to the underlying liability. (Doc. 67-10 at 5)

         During the pendency of discovery in this case, Defendant sent Plaintiff a Request to Produce (“RTP, ” Doc. 67-1). Included in the RTP was a request for the underlying litigation file (the “Sutton File”), which one of Plaintiff's attorneys, Greg Yaffa, agreed to obtain from Sutton and to produce. (Yaffa Aff., Doc. 67-5, ¶ 6; Doc. 107 at 94:4-9). In so agreeing, Yaffa stated that he would remove all privileged documents from the file and produce it along with a privilege log. (Doc. 67-5 ¶ 6). Plaintiff's response to the RTP also stated “It is anticipated that documents responsive to this request will be contained in the underlying litigation files . . . . These files are not currently in the Plaintiff's possession and it is anticipated that the responsible parties will prepare a privilege log relating to said files.” (Pl.'s Resp. to RTP, Doc. 67-2, at 2). Plaintiff's law firm, Domnick Cunningham & Whalen[1] (the “Cunningham Firm”) received the Sutton File around December 16, 2015. (See Dec. 16, 2015 through Jan. 20, 2016 E-mail Chain, Doc. 67-3, at 4). It was contained in nine bankers' boxes, consisting of over 17, 000 pages. (Id.; Doc. 67-5 ¶ 16). The Sutton File included all of the above-referenced notes and correspondence created by Sutton. (See generally Doc. 67-10). Upon receipt, Yaffa contacted Amanda Kidd, an associate attorney with Defendant's law firm, regarding the specifics of the production of the Sutton File. (Doc. 67-3 at 4). In a follow up e-mail, Yaffa again confirmed that he would “produce all of the non privileged documents” in the Sutton File. (Id. at 3).

         A legal assistant at the Cunningham firm, Laura Sabbatino, sent the Sutton File to a copy service to have it copied and bates stamped. (Sabbatino Aff., Doc. 67-6, ¶¶ 8-9). When Sabbatino received the file back, the attorneys discovered that the service failed to bates stamp it. (Id. ¶ 11). Sabbatino then re-sent the Sutton File to the copy service. (Id. ¶ 12). She received the bates-stamped file back from the copy service on January 13, 2016. (Id. ¶ 16). During this time, Sabbatino was contacted at least twice by a legal assistant at Defendant's law firm, Young, Bill, Boles, Palmer & Duke, P.A. (the “Young Firm”), regarding when the Young Firm could expect delivery of the Sutton File. (See Doc. 67-3 at 1, 2). Sabbatino, who, although otherwise an experienced legal assistant, was new to the Cunningham Firm, felt that the production of the Sutton File was delinquent and that she needed to expedite its delivery to the Young Firm. (Doc. 67-6 ¶¶ 2-5, 18). Therefore, Sabbatino drafted a cover letter for her own signature, rather than one of the attorneys' signatures, and sent a CD containing an electronic copy of the entire Sutton File to the Young Firm via overnight mail. (Id. ¶¶ 18, 20). Sabbatino did not copy any of the attorneys at the Cunningham Firm on her communications regarding the production of the Sutton File, nor did she advise the attorneys that she had sent the file. (Id. ¶¶ 13-15, 20, 22; Doc. 67-5 ¶ 21; Cunningham Aff., Doc. 67-4, ¶¶ 21-22; see also Doc. 67-3 (exhibiting that no attorneys at the Cunningham Firm were copied on Sabbatino's e-mails with the Young Firm regarding the production of the Sutton File)). Indeed, after Sabbatino's production of the Sutton File, attorneys at the Cunningham Firm continued to work on the file, reviewing documents and starting a privilege log. (Doc. 67-4 ¶¶ 19-20; Doc. 67-5 ¶¶ 18-19).

         When the Young Firm received the file, the electronic documents were placed on the firm's internal server. (Doc. 107 at 99:19-21). Kidd accessed the file and did a “scrolling review” of all the documents, viewing every document in the Sutton File and selecting certain folders to be printed for a more thorough review. (Id. at 99:24-100:7; Kidd Dep., Doc. 97-1, at 23:21-24:4).[2]Kidd observed that there was no privilege log provided with the Sutton File. (Doc. 107 at 138:21- 139:1). She also recognized that the Sutton File included documents over which privilege could have been asserted. (Id. at 126:13-14). In fact, Kidd testified that she was “surprised” and thought it was “unusual” that the Cunningham Firm would produce such documents, but she did not think the disclosure was inadvertent. (Id. at 126:4-7; Doc. 97-1 at 39:15-18).

         One of the documents Kidd reviewed in depth was Sutton's December 2007 case notes made after his call with Defendant, where Defendant advised that it would tender the policy limits; the note included Sutton's opinion regarding whether Plaintiff should return any such tendered check. (See Doc. 97-1 at 33:20-34:1). Kidd believed the note was relevant to Defendant's affirmative defense that Plaintiff was unwilling to settle her claim, (see Doc. 107 at 135:18-136:5), and Kidd advised her supervising attorney, Richard Young, of the contents of these notes and provided him with a copy, (Doc. 97-1 at 33:20-34:1; Young Dep., Doc. 97-2, at 35:15-36:12). Young was in the midst of three back-to-back trials at the time, and therefore, he did not give these documents his full attention. (Doc. 97-2 at 20:15-19). Kidd also sent at least one document to Defendant's representatives via e-mail. (Doc. 97-1 at 36:12-21). In addition, such information was discussed between Young, Kidd, and Defendant's representative in the context of whether to accept a settlement offer from Plaintiff. (Doc. 97-2 at 31:20-32:1).

         Based on the documents in the Sutton File regarding Sutton's consultation with Cunningham, Kidd determined that Cunningham was a potential witness in this case. (Doc. 107 at 128:5-13). Kidd believed Cunningham had information regarding Plaintiff's willingness to settle the underlying case and her reasons for rejecting the policy limits. (Id.). On March 15, 2016, the Young Firm sent a request to the Cunningham Firm to conduct the deposition of Cunningham. (Doc. 67-4 ¶ 21; Doc. 67-5 ¶ 20). It was this request that first notified any attorney at the Cunningham Firm that the full Sutton File had been produced. (Doc. 67-4 ¶¶ 21-22; Doc. 67-5 ¶¶ 20-21). Cunningham and Yaffa immediately called the Young Firm, asking for Kidd or Young. (Doc. 67-4 ¶ 24-25; Doc. 67-5 ¶¶ 23-24). When neither were available, a message was left. (Doc. 67-4 ¶ 25; Doc. 67-5 ¶ 24). The next day, when neither Kidd nor Young had returned the call, Cunningham sent the Young Firm a letter, transmitted via e-mail, advising the Young Firm that the Sutton File was inadvertently disclosed and demanding its immediate return, which would be replaced by a file with the privileged information removed and a privilege log. (Doc. 67-4 ¶ 26; Doc. 67-5 ¶ 25; Mar. 16, 2016 Letter, Doc. 67-7).

         The next day, Kidd responded via e-mail stating that she and Young were out of the office and requesting five days to respond to the letter. (Mar. 17, 2016 E-mail Chain, Doc. 67-8, at 1). Cunningham responded that he was concerned about “being accused of not acting immediately when we became aware of the inadvertent disclosure.” (Id.). Kidd responded, “This is not an issue. You are obviously acting immediately and I am not disputing that.” (Id.).

         On March 22, 2016, Kidd sent a letter to the Cunningham Firm, refusing to return the Sutton File, but agreeing to sequester them, stating: “[A]s an officer of the court and in the spirit of good faith, we will agree to not review or utilize the documents for a sufficient length of time so that the court can determine whether production of over 17, 000 pages without a privilege log is considered to be a waiver.” (Mar. 22, 2016 Letter, Doc. 67-9, at 1). Thereafter, Kidd filed a motion to compel the deposition of Cunningham. In that motion, Kidd referenced and quoted information contained in the documents that were subject to sequestration.[3] Two weeks after the Cunningham Firm demanded the return of the Sutton File, it produced a privilege log to the Young Firm. (See Doc. 97-1 at 63:10-15 (agreeing that Plaintiff produced a privilege log on the day that her first motion to compel was filed); Doc. 27 (exhibiting that Plaintiff's first motion to compel was filed on March 29, 2016)).

         II. Standard of Review

         Plaintiff's objections to the Magistrate Judge's Order are reviewed under the “clearly erroneous” or “contrary to law” standard. Fed.R.Civ.P. 72(a); Hallford v. Allen, No. 07-0401-WS-C, 2007 WL 2570748, at *1 (S.D. Ala. Aug. 30, 2007) (citing additional authority). The objected-to portions of the R&R are reviewed de novo. 28 U.S.C. § 636(b)(1); see also Fed. R. Civ. P. 72(b)(3).

         III. Motion to Compel Return of Documents

         The parties agree that Plaintiff has established a prima facie case of privilege for all of the items listed on the Second Amended Privilege log. Plaintiff asserts that Defendant should be required to return all of those documents. Defendant argues that it should not be compelled to do so because Plaintiff waived any privilege or protection and that the work product protection does not apply in bad faith cases to the type of documents at issue here. Each argument will be addressed in turn.

         A. Waiver by Disclosure

         Defendant argues that Plaintiff's disclosure of privileged information waived any privilege or protection. Federal Rule of Evidence 502(b) provides that when a disclosure is made in a federal proceeding, it “does not operate as a waiver . . . if: (1) the disclosure is inadvertent; (2) the holder of the privilege or protection took reasonable steps to prevent disclosure; and (3) the holder promptly took reasonable steps to rectify the error, including (if applicable) following Federal Rule of Civil Procedure 26(b)(5)(B).” Judge Spaulding determined that Plaintiff satisfied all three elements, and therefore, Plaintiff's inadvertent disclosure did not constitute a waiver. Defendant objects.

         1.Inadvertent Disclosure

         Judge Spaulding found that the disclosure was inadvertent because it was clearly a mistake and there was no evidence that Plaintiff intended to waive her privileges. Rule 502 does not define inadvertence. Some courts take a common-sense approach, “essentially asking whether the party intended a privileged or work-product protected document to be produced or whether the production was a mistake.” Thermoset Corp. v. Bldg. Materials Corp. of Am., No. 14-60268-CIV, 2015 WL 1565310, at *8 (S.D. Fla. Apr. 8, 2015) (quotation omitted). Others continue to use pre-502[4] factors, “including the total number of documents reviewed, the procedures used to review the documents before production, and the actions of the producing party after discovering that the documents had been produced.” Id. The Court agrees with Judge Spaulding that, in this situation, incorporating the pre-502 considerations is unnecessary because they are adequately addressed under the other 502 factors. See Fed. R. Evid. 502 Advisory Committee's Note to 2008 Amendment (noting that while Rule 502(b) “is flexible enough to accommodate any of [the pre-502] factors, ” “[t]he rule does not explicitly codify that test, because it is really a set of non-determinative guidelines that vary from case to case”).[5]

         The Court also agrees with Judge Spaulding that the evidence indicates that Plaintiff did not intend to waive her privileges. Defendant asserts that this determination was erroneous, but its arguments are somewhat confusing. Defendant argues that, overall, Plaintiff was not diligent in producing the Sutton File, and therefore, somehow, that delay exhibits an intention to disclose and waive privileged information. First, Defendant skews the facts. While Defendant correctly asserts that the Sutton File was not produced for 120 days after the formal request for production, Defendant ignores the fact that the Sutton File was not in Plaintiff's possession and that Defendant agreed to extensions of time.[6] Second, Defendant fails to explain how a delay in producing documents evidences an intent to disclose privileged materials.

         Next, Defendant asserts that Plaintiff's disclosure of over 17, 000 pages without a privilege log or an indication of asserting a privilege evidences that Plaintiff intended to waive her privilege. Defendant is incorrect that Plaintiff gave no indication that it was intending to assert any privileges-in the communications between counsel leading up to the production, Plaintiff's counsel referenced creating a privilege log and asserting privileges with regard to the Sutton File at least twice. Second, the mere fact that the documents were disclosed without a privilege log does not indicate that Plaintiff intended to waive her privileges under the specific circumstances here; it is undisputed that Sabbatino incorrectly disclosed the documents without consulting her supervising attorneys. Moreover, the attorneys were in the process of reviewing the Sutton File for the purpose of creating a privilege log at the time Sabbatino sent the file to Defendant and continued to do so after the disclosure, indicating that Plaintiff's attorneys were not aware of, nor did they intend, such disclosure. Defendant's focus on the narrow fact that a privilege log did not accompany the file without explaining the context of the disclosure ignores the forest for the trees.

         Finally, Defendant asserts that Sabbatino's Affidavit and Yaffa's Affidavit contradict one another. They do not. Sabbatino avers that there were delays in obtaining a bates-stamped version of the Sutton File and that Defendant's counsel's office was repeatedly contacting her, inquiring as to the status of the file. As a result, Sabbatino felt rushed and pressured to produce the file quickly. Yaffa avers that, in his opinion, there was no rush to produce the file because of the agreed extensions of time and the fact that the discovery deadline was in the distant future. These statements merely express the opinions and experiences of each individual. Both Yaffa and Sabbatino also agree that they did not discuss the status of the Sutton File at the time. Therefore, it is entirely reasonable that Sabbatino, who was new to the office, felt rushed to produce the file while Yaffa, and experienced litigator who was not copied on the e-mails from Defendant's firm inquiring as to the status of the Sutton File, did not.

         Accordingly, Defendant has not established that Judge's Spaulding's determination that Plaintiff's disclosure was inadvertent was clearly erroneous or contrary to law.

         2. Reasonable Steps to Prevent Disclosure

         It is undisputed that Plaintiff's law firm implemented the following procedure to avoid disclosure of privileged materials: once a bates stamped copy of the underlying litigation file is obtained, an assigned attorney will review the file and prepare a privilege log; then, prior to transmitting the file to opposing counsel, an attorney must conduct a final review and sign the transmittal letter, confirming that what is being disclosed is appropriate. (Doc. 67-4 ¶ 9; Doc. 67-5 ¶ 7; Doc. 67-6 ¶ 8). Judge Spaulding determined that this procedure constituted reasonable steps to prevent disclosure. Defendant objects to this determination.

         Defendant first argues that there is no evidence that Sabbatino knew of the procedure prior to this incident or whether she had deviated from such procedures previously. Sabbatino makes clear in her Affidavit that she is familiar with the above-referenced procedure. Although she does not expressly state that she was aware of this procedure prior to this incident, it is certainly implied in the context of her statements. (See Doc. 67-6 ¶¶ 9, 19 (noting that she was “[a]ttempting to follow” the firm's procedure and that she “forgot that privileged documents needed to be removed” from the Sutton File)). Other than pure speculation, Defendant has provided no basis for this Court to question Sabbatino's sworn Affidavit. Further, contrary to Defendant's argument, there is testimony that indicates that Sabbatino had not engaged in this type of behavior previously; both Yaffa and Cunningham aver that in the twenty-four years and twelve years, respectively, that each has been litigating bad faith claims with Plaintiff's law ...

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